MARKET UPDATE BLOG
Multi-Family Lending Overview
February 2, 2017

Multi-family properties have traditionally been a sought
after asset class for real estate investors and lenders alike. It is important
to understand the pros and cons of different lending categories before making a
decision on your multi-family finance needs. The following is a summary of pros
and cons for each category of multi-family lenders.


Life Companies

Pros:

  • Aggressive long term fixed rates (rates as low
    as 3.75% for 10 years)
  • Can fix a long term rate for up to 30 years
  • Portfolio execution
  • Can do loans from $1M and up
  • Rate lock at application (may require deposit)

Cons:

  • Conservative underwriting
  • Loans typically require prepayment penalties
    with yield protection
  • Heavy due diligence


Banks

Pros:

  • High LTV’s (up to 75%)
  • Aggressive shorter term loans (floating, 3, 5,
    and 7 year terms)
  • Interest rates can be very competitive
  • Minimum loan amounts as low as $500,000
  • Flexible (step-down) prepayment penalties
  • Inexpensive execution
  • Rate lock at application (may require deposit)

Cons:

  • Most require personal guarantees
  • Typically cannot offer long-term fixed rates
  • May require banking relationship


CMBS Lenders

Pros:

  • Non-recourse
  • High LTV’s
  • Can offer 10 year fixed rates
  • Interest only available

Cons:

  • Yield maintenance or defeasance prepayment
    penalties
  • Expensive execution
  •  Servicing related issues (post-closing) may be cumbersome
  • Rate lock occurs very late in process

 

Agency Lenders

Pros:

  • Can lend up to 80% LTV
  • Fixed rate terms from 3-30 years
  • Competitive interest rates
  • Non-recourse
  • Step down prepayment penalties may be available
  • Interest only is available
  • Competitive rate incentives for
    low income and environmentally conscious properties

Cons:

  • Cumbersome loan process
  • Heavy up front due diligence loan process
  •  Governmental oversight
  • Early rate locks add to loan costs and or rate


At Barry Slatt Mortgage, we have long standing relationships
with lenders in each of these categories, through which we craft financing
solutions for our clients. There are many choices to be made when seeking
financing for your multi-family property.  It can be helpful to consult
with your full service mortgage banking professional to assist in the decision
making.


Brian Whitney
Commercial Mortgage Banker
brianw@slatt.com